Examination of Witnesses (Questions 266
- 274)
MONDAY 7 MARCH 2007
MR GIUSEPPE CASTIGLIONE
Q266 Chairman:
Mr Castiglione, thank you very much indeed for finding the time
to come and talk to us. If I can briefly explain what our job
is, we are a Sub-Committee of the Select Committee on the European
Union of the House of Lords in the British Parliament and we are
carrying out an inquiry into the wine regime. In particular we
would value your observations and comments, because clearly you
have an important role to play in the European Parliament as it
develops its views on the wine regime. I wonder if I could start
the questions by asking you to give us your view of what you see
the reform of the wine regime delivering. What do you think will
be the outcome of the reform?
Mr Castiglione: I would like to thank you for
giving me this opportunity to get over the message about the work
which has taken up a lot of our time and will continue to do so.
The wine-growing sector in Europe is a very important sector and
is linked to the environment, to the earth, how you cultivate
the earth, all these major questions. There are many factors which
see us nowadays competing not only amongst Member States in the
internal market but there is a wider type of competition from
Australia, South Africa, Chile and from emerging countries. It
is growing wider and wider in scope, so for us in Europe in wine-growing
it is very important above all for the European agricultural economy.
We have endorsed the choice of the Commissioner that we have a
thinking phase and a debate and look to parliamentary initiatives
which will follow the Legislative Proposal which should come in
in a couple of months' time. The Legislative Proposal will be
out in about June, and we will work then with the same sort of
commitment we have devoted to it over the last few months. But
we do agree with, if you like, this first challenge from the Commissioner,
who has adumbrated a new strategy saying we have to reform the
wine market. It is absolutely necessary to give new impetus—I
think, some new fizz—to the European wine-growing companies
facing these new challenges from countries which more and more
are finding outlets in the European market for their wines, and
it is something we have to square up to. We have to try and get
new market share via reform, we agree on that and that is a challenge.
What are the guidelines, the most important aspects which the
Commissioner pinpointed to get this new impetus? Above all, there
is over-production of wine in Europe, and the Commission will
respond to this by grubbing up about 400,000 hectares of wine-growing
in Europe along with measures which they will propose such as
abolition of certain parts of the market. What they are trying
to do is make sure that the wine which is produced is more market-orientated,
so to that extent they want to abolish aids to production. Also
looking to the market brings up the issue of the importation of
musts from third countries, in particular for non-quality wines,
and for table wines the possibility of putting on the label where
it has come from and the year. We have discussed this amongst
the countries. It brought in the producers in general, and there
has been a major thinking process for a year now amongst all the
protagonists in the various regions from the various regional
specificities. There has been real work, but useful work, I think,
and the resolution approved by the Parliament looks to the first
stage of general mediation and conciliation, trying to give a
much clearer stamp to what we want from the Legislative Proposal.
The Commission should take on board, we think, what has gelled
out from the Parliament of 27 countries, so not really grubbing-up
for grubbing-up's sake. The Commission is looking at 400,000 hectares
in Europe but there are many countries which market wine in the
European market and they are continuing to set up production processes,
so you cannot have indiscriminate grubbing-up, especially since
countries have had incapacity, so you have to focus your grubbing-up.
It is of cultural and environmental value as well, this whole
issue. Wine produced in many areas of Europe is something which
is environmentally prime and has a tremendous link to the structure
of the land. In many parts of Europe, if there were no more vineyards,
from the environmental point of view it would be a real catastrophe.
So we have tried to come up with a more subtle response of "ifs"
and "buts" and grey areas from the Parliament where
there are no environmental problems or no wine growing vocation.
You have to look very closely at the actual circumstances. Member
States have to look very closely at where we are doing the grubbing-up,
how much and how, and I think we all very much agree on that.
A topic which has been looked at by the Parliament, which the
Commissioner is very keen on (and perhaps we are all keen on),
is this question of how we promote our wine. The competitiveness
of our undertakings can be made more profitable with sustained
support for marketing. Our competitors, we have noted, really
have massive advertising campaigns, even if their products are
of lesser quality, are less good for the environment or less linked
to the structure of the land. Nevertheless, a tremendous amount
of investment goes into the advertisements, certainly compared
to what we are doing as Europeans. In the Farm Committee we have
called for a study looking to young English people, because 70%
of young English people do not really know much about European
wine. It may be better quality, but nevertheless they know Australian
wine better and this was a fact which came out of these studies
and really is food for thought—this question of how you
promote, market, advertise, and it is something which has to be
made extremely clear by the Parliament. On topics such as aid
to markets, we should not be producing just to distil. We agree
with that. We agree that we should abolish aids for that but we
came up with a few topics of our own which we think could be subjects
for regulation—for example, in production this question
of distillation of by-products or, if you like, finding outlets
for by-products. How you find outlets for by-products is very
important for regional reasons above all and that is something
we have to bear in mind. There is then this question of how you
get rid of the by-products, market them, et cetera. There is a
crisis solution you always have to have in farming. Sometimes
in a year you have an environmental disaster or over-production.
There should be some reform of the CMO which you can look to if
necessary, so we are against distillation and therefore market
aids just for distillation purposes, but I think the Parliament
has a few points to raise there. What do you do with the by-products?
The environment is linked to that. How do we define a mechanism
and manage it in the agricultural area to cover these problems?
Another very controversial area much discussed from the various
aspects is the type of production, the question of adding to and
enriching wines. A lot of countries enrich their wines or add
to them. Many countries, not necessarily in Europe, use that practice.
In many areas of Europe, above all in the Mediterranean area,
there is hostility to this practice of, if you like, processing
your wine and building your production on that basis, but the
northern countries defend that practice, so enriching their wines
is a sort of traditional practice. But we think we could possibly
reconcile these positions by saying up until when you can continue
adding sugar, say, but you cannot subsidise or aid imports of
must which many Mediterranean countries use. You would link those
two things, aid to must and enrichment in many countries, because
it would be unfair competition otherwise. Some people produce
with added sugar and others import must for their fermentation
process, so you do not want to skew the fair playing field when
it comes to market aid. We are going to get rid of all market
aids but this is nevertheless a relevant topic for all countries.
Then there is a topic on labelling. We have said "no"
clearly to imported must from third countries. We do not say why
people are importing must from third countries. We do not see
why, when there is over-production everywhere, as I have said.
We say "no" inter alia because it might give
rise to confusion when it comes to labelling, where it was produced,
the vineyard and the year. If you have imported your must, the
consumer can be really confused, so I think the consumer has a
right to know genuinely what is in the bottle, so for table wine
where it is produced exactly and the year have got to be clear.
This is something we will have to discuss and we would be interested
to hear what you might feel about that but allow us to improve
our draft further. Maybe we could have a meeting of minds on that.
Chairman: Thank you very much indeed.
That was very helpful. My colleagues have a number of individual
points they want to bring up.
Q267 Viscount Ullswater:
You just touched on some of the wine-making practices and I think
you indicated that you were against the addition of sugar but
were a little bit more equivocal about the maintaining of aid
for musts for the southern states. I would like to know your particular
views on this and whether you think a compromise can be reached
with regard to enrichment, bearing in mind that a lot of the competition
from the third countries, from the New World, will be making wine
with these newer practices and they are going to be a large amount
of the competition.
Mr Castiglione: As regards this enriching, I
have told you Parliament's position, not my personal one. Personally,
I recognise that it is a traditional practice and a great many
countries would not be producing wine at all if they could not
do that. It is a widespread practice and it is accepted, but there
is a point about many other regions in Europe where now they help
the must, and there is one party that wants to abolish that altogether
and there is another set of people who are increasing production
through enriching with sucrose and it is difficult to reconcile
the two. The compromise position is that the traditional practice
is recognised but in that case the aid to the must and the enrichment
have to be kept very closely linked to each other. What you cannot
have is one set of people adding sugar—and, in fact, with
the sugar market reform sugar is getting cheaper, which makes
it cheaper to add it to your wine—but meanwhile on the other
hand we abolish the aid to must which we already have on our internal
market, so these are two things that have to be kept very closely
connected. Any position that does not tie those two things closely
together—if you ask me, having seen the positions of all
the countries—is going to be very difficult to defend. There
is my personal opinion, which is that you should not be using
sugar or sucrose at all, but on the other hand there is the abolition
of aid to must, but all of that is my personal position. From
what I have seen, having spoken to all the countries and seen
the German position on enrichment right across the political board,
they are absolutely solid behind the traditional practice, they
say, of adding sucrose, and that applies, as I say, right across
the political spectrum. They are shoulder to shoulder behind the
practice of adding sucrose. I am prepared reluctantly to give
up aid to must but at the same time on the internal market you
cannot have distortions of competition, so what I want is to see
the two things closely connected in the future, including in the
Council debate.
Q268 Lord Cameron of Dillington:
If you are against chaptalisation, are you also against acidification?
Mr Castiglione: Yes, of course.
Q269 Lord Plumb:
You have referred to grubbing-up as a method of trying to reduce
volume and, of course, it is one that we have experienced over
many years now. Reading the full report, there seem to be a lot
of people who are concerned because they feel they have been grubbing
up their vines, allowing therefore wine to come in which is in
competition (and unfair competition as seen by some) while they
are grubbing up. However, the report itself says that the initiative
should be that of the individual producer and it should be perhaps
on a temporary basis, and it appeared too that Commissioner Fischer
Boel was agreeing with that. How do you see the grubbing-up working
if it is on a temporary basis? Do you see people responding to
it? Or is it not going to make much difference?
Mr Castiglione: As regards temporary grubbing-up,
I have very great doubts about that. What we are saying is that
there should be controlled grubbing-up, in other words, co-ordinated
with the Member States—for instance, if you have an area
which is not traditionally wine-making and when the region is
happy about the grubbing-up and when it is not going to do harm
to the environment and there is not some kind of geological difficulty
with it. We put all these conditions in the report somewhere.
We have got a few of these criteria—mountain areas, coast
areas, islands, mainly producing geographically denominated wines,
areas where you have to avoid erosion, loss of bio-diversity,
historical importance, vineyards whose wines have a commercial
market, vineyards which should not be reduced too much because
it would then undermine a whole DoC region, vineyards which have
had structural aid under community programmes, and regions where
there would be environmental risk. These are all areas where there
should not be grubbing up and anyway there needs to be co-ordination
with the Member State. If you ask me personally—
Q270 Chairman:
I just wonder—is there anywhere else left?
Mr Castiglione: Yes, there is. We are making
an effort here. There are still vineyards with low yields that
are not going to be able to produce fully, areas where there is
early retirement for the grower, places where there is no market
for the product. But anyway it would always have to be the Member
State that would end up deciding where the grubbing-up could happen.
This is what we are calling controlled grubbing-up.
Q271 Lord Plumb:
So you see this leading towards further restructuring of the whole
of the wine-growing areas—in other words, some of the units
getting larger as some of the vineyards are grubbed up and compensation
has been paid?
Mr Castiglione: The basic starting point for
us is that we do not think you can re-launch wine production through
a grubbing-up programme. Meanwhile, people are planting away in
other parts of the world. The grubbing-up measures in the past
frequently have not worked. We have had some experience with this
in Europe in the past. It has not cut production of wine, for
example. And then there is another thing you cannot understand
in the Commission's proposal, which is the logic of it. On the
one hand, you are grubbing up 400,000 hectares and meanwhile you
are allowing the import of must from third countries to make into
wine. Then there is the question of liberalisation. We are calling
for a consistent proposal from the Commissioner. But, if you are
grubbing up on the one hand, liberalisation and import of must
from third countries is not consistent or logical. Basically,
what we cannot understand is how this much grubbing-up is going
to reduce the excess in production or how it is going to allow
European wine-growing to be re-launched.
Q272 Baroness Miller of Chilthorne Domer:
I would like now to turn to budgetary matters. The report makes
reference at several points to budgetary matters. In particular
Paragraph 2(f) states that the reform must take into account "the
prospects of the CAP, in particular future funding, in respect
of which discussions will begin in 2009". Then Paragraph
8 suggests that reform may require additional funding. Do your
colleagues share these views on budgetary matters? And do you
think it is practical to conclude a wine reform before the 2009
budgetary round review?
Mr Castiglione: The budget, unfortunately, does
not apply just to the wine CMO. The same thing happened with fruit
and vegetables here last week. We were talking to the Commissioner
about producer organisations in that field last week, the resources
for producer organisations to do investment plans. The Commissioner
says there is no way that there are going to be any extra resources
as there are not any resources in the budget for that. I do not
believe there is going to be any more budget. I really do not
see where any more resources could come from, but within the wine
budget it seemed to us that the First Pillar of the CAP should
be retained but then there are lots of measures on the rural development
side which could be used to help the productive environment for
vineyards. We do not believe in more resources but we think that
under the First Pillar, by renaming expenditure, reclassifying
it, by taking money from certain market measures, we could make
some resources available for what is really important. I was talking
about marketing, and I am sure you will agree with me that, if
you are going to do any marketing, you have to have some money.
You cannot do any marketing unless you have a good deal of money
to spend. So I think yes, the reform can be achieved before the
2009 budget.
Q273 Lord Cameron of Dillington:
Is there not room under the Pillar 2 funding—and I recognise
there is a difference of opinion between you and the Commission—for
money to be spent on non-wine orientated projects? For instance,
where you have grubbing-up you need to have other businesses being
started, other enterprises, other structural investment in order
to compensate that neighbourhood so that they have a future.
Mr Castiglione: As I said before, in the rural
development policy, that is under the Second Pillar, there are
regional development plans, a whole series of other measures.
In all of these places you can find considerable resources, sufficient
resources, for the wine industry to get some resources to improve
its competitiveness. I have spoken to the Commission about this.
There are regional development plans being prepared and within
those there is a lot of money to support an environment of competitiveness
and, within that, you can improve the environment, you can get
added value out of culture and you can also improve the wine-producing
atmosphere. It is an important subject, certainly, but the important
point here is that we are competing hard with countries that are
devoting a lot of resources to this, so we want to keep the resources
in the First Pillar, we want to push hard on competitiveness.
But, as far as grubbing-up is concerned, you have to remember
that the heritage of the wine-producing regions is an important
cultural heritage and we need to support that in the broadest
possible sense; at least that is what I think.
Q274 Lord Bach:
There seems to be agreement between you, the Parliament and the
Commission, on the idea of "national envelopes", but
it seems that the Parliament itself has not been able to come
to an agreement on how the "national envelopes" should
be allocated between Member States, and that is perhaps a pretty
important issue. Could you just give us the benefit of your views
on how you feel an agreement might perhaps be reached on that
point?
Mr Castiglione: I recognise that, when there
is an appropriation in the budget, everybody tries to get his
hands on it. My view has always been that you have to be consistent
with all the other reforms that have been carried through. We
have had the sugar reform, we have had the banana reform, we have
had others, and Parliament's view has always been that the same
states within their budget should have the same resources. That
is the basic principle and, of course, I can see that some individual
Member State may have to make a special sacrifice to the others
and I do not have any objection to that. But the idea that Italy
or Spain could be heavily and specially penalised—obviously,
they are going to be penalised like everybody else but specially
penalised, no! I think you take the history as your basis and
we are prepared to make sacrifices. But after all the other reforms
were done, with countries maintaining their budgets and now suddenly
for wine we are embarking on some other principle,—No. We
are talking about a large industry here. I am not talking about
strict historical figures but the basis of our proposal is the
historical criterion. In point of fact, I have got an amendment
that I have tabled. A reasonable solution could be one based on
what each Member State gets under the present CMO or else a formula
or a joint or mixed arrangement taking into account the area under
vines, which would be a good way of achieving the objective. We
are open to dialogue. What we certainly cannot envisage is a sudden
drastic cut in only one country's budget, but I think there can
be cuts if they are the same for everybody—which, of course,
is bad for me back home in Italy because it would mean a cut for
Italy. We each have to defend our own country, do we not? We believe
in the European Union but we also have to defend our own countries.
Chairman: Thank you very much, and on
that point I think our skill as politicians is to make self-interest
appear as the highest form of altruism. Thank you very much for
your time.
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